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MoneyGram, Ant Financial Terminate Merger: What's Next?

The merger of MoneyGram International Inc. MGI with Ant Financial Services Group has met a dead end after the deal was shown a red flag by the Committee on Foreign Investment in the United States (CFIUS).

Ant Financial, controlled by Alibaba Group Holding Limited BABA co-founder Jack Ma, was slated to acquire MoneyGram for $18.00 per share, which amounted to nearly $1.2 billion but ended up paying a termination fee of $30 million.

Despite concerted efforts by both the companies to satisfy the CFIUS, the security concerns were a real bother. Ant Financial made not one but many proposals for the deal to the regulator and also cited its plans to keep MoneyGram’s headquarters, management team and employees in Dallas. It also agreed to keep the company’s servers and data in the United States. The deal was feared to have left the data of U.S citizens and military personnel who used MoneyGram services vulnerable.

From the very beginning, there was an uncertainty about the deal, given the change in the geopolitical environment and Donald Trump’s “America First” platform, which calls for tougher measures to keep overseas buyers away from domestic business.

What’s in the Offing?

Though the merger has been blocked, MoneyGram and Ant Financial have announced a partnership in an effort to work out new strategic initiatives in the remittance and digital payments markets. The companies aim to provide enhanced services and grab greater share of the market.

Will Euronet Make Another Attempt?

Besides Ant Financial, Euronet Worldwide, Inc. EEFT also tried its bit to woo MoneyGram but failed to impress the latter. Now, we will not be surprised to see Euronet once again making a bid to acquire MoneyGram. If it happens, the deal will have higher chances getting an approval as we don’t see any hang ups from CFIUS or closing conditions related to securing change of control consents covering money transmitter licenses in MoneyGram’s jurisdictions.

Moreover, the business of Euronet and MoneyGram complement each other. While Euronet’s main focus is smaller, independent agents, MoneyGram partners with several large chains. Both companies have an impressive share in the money transfer market next only to industry leader, Western Union Co. WU. Together they can pose stiff competition to Western Union, which commands a premium pricing in many corridors due to its established and globally recognized brand name.

Moreover, the money remittance market remains significantly underpenetrated. The combined company will be able to garner a much bigger pie of the booming remittance industry. Also, they will be able to significantly expand their digital platform.

Share Price Performance

Shares of MoneyGram have lost 14% last year, underperforming the industry’s growth of 17.9%. The company has been suffering from factors like stiff competition, troubled global economy, forex headwinds and increased compliance regulations.

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